President peeved over payment limits

Ever since the Environmental Working Group began posting the names of farm payment recipients on its Web site, farmers have been wondering how the negative publicity would play out in the farm bill debate.

It now appears the EWG’s massive propaganda effort and the thousands of negative stories it generated about farm programs may have reached the one person who counted the most — the president of the United States.

Bill Bridgforth, an attorney from Pine Bluff, Ark., who has quietly built a reputation as one of the foremost experts on payment limit rules, says that’s the impression he received while briefing Deputy Agriculture Secretary Chuck Conner on the impact of the administration’s proposed $200,000 adjusted gross income limit.

House Agriculture Committee Chairman Collin Peterson, D-Minn., invited Bridgforth to meet with Conner and several USDA undersecretaries in Washington. Conner pulled no punches, according to Bridgforth.

“I want to tell you at the outset that President Bush has said the defining issue in the 2007 farm bill is to get the gross income limit fixed,” Bridgforth quoted Conner as saying. “The president has said he’s sick and tired of rich farmers getting farm program payments.”

The president’s ire over such payments has led to a situation that may be unprecedented in farm bill history, Bridgforth said in a speech at the Arkansas State University Agribusiness Forum in Jonesboro, Ark., Feb. 13.

“Something new has happened for the first time, I believe, since the first farm bill under President Lincoln,” he noted. “We have a president who has made it clear he plans to veto either of the House or Senate farm bills because of one area — payment limits.

“I can’t explain to you why it is of such concern to President Bush. But I was assured personally by the secretary of agriculture that it is.”

Bridgforth says whoever is responsible for the president’s position on farm payments is misinformed.

Despite all the hand wringing from the Environmental Working and other interest groups and national media outlets such as the New York Times and Washington Post, U.S. farmers rank near the bottom in farm subsidies.

In 2002, which was one of the high cost years for U.S. farm programs, U.S. producers received an average of about $49 per acre from government payments. That compares to the equivalent of $309 per acre for the European Union and $4,600 per acre for Japan.

And all the rhetoric from U.S. senators such as Charles Grassley, R-Iowa, and Byron Dorgan, D-N.D., about big payments to corporate farms is so much nonsense, says Bridgforth.

“Ninety-eight percent of U.S. farms are run by families,” he says. “You hear a lot of talk about corporate farms, yet less than 2 percent of U.S. farms are run by corporations. Most of those are composed of family interests who, under the three-entity rule, have set up corporations to improve their ability to maximize farm program payments.

“The cost of farm programs compared to the total federal U.S. budget is a pimple. That’s exactly what it is. Yet, agriculture accounts for almost 20 percent of the nation’s GDP — over $3.5 trillion annually.

Bridgforth notes farmers receive only 20 cents of every dollar spent on food. However, U.S. consumers spend just 10 percent of income on food compared to Japan’s 26 percent and India’s 51 percent.

At least 98 percent of the income of farm households comes from off-farm sources. Farms with gross sales less than $10,000 account for almost 60 percent of that, yet those farms are included in the numbers used by Grassley and Dorgan when they claim that 10 percent of the farmers receive 70 percent to 80 percent of farm payments.

Farms with gross sales of less than $10,000 are responsible for less than 4 percent of total farm receipts and receive 7 percent of farm program payments. (USDA says the average on-farm income for what it defines as a farm in the United States is $1,098 per year.)

“Farms with gross sales over $50,000 account for 23 percent of the farms. Those are responsible for 90 percent of farm receipts and receive 81 percent of farm program payments,” Bridgforth notes.

“Yet, all the while, the definition of the farm in the United States remains the same. If a farm receives $1,000 in gross sales — or is capable of receiving $1,000 in gross sales — then it’s a ‘farm.’”

Both the House and Senate farm bill contains significant payment limit reforms, notes Bridgforth. For openers, farmers will no longer be allowed to hold 100 percent ownership in one entity and 50 percent ownership in two others — the so-called three-entity rule.

The House bill increases the limit on direct payments from the current law’s $40,000 per person to $60,000 and leaves the limit on counter-cyclical payments at the current $65,000 for both the target price-based and revenue-based programs. The Senate bill limits direct payments to $40,000 and reduces the counter-cyclical limit for traditional and average crop revenue programs to $60,000.

Both bills would require “direct attribution” of payments. “What that means is it makes no difference how many entities you’re involved in or how many operations you farm,” said Bridgforth. “Everything will be pegged to your Social Security number and when that hits the limit you’re done (receiving government payments).”

The bills make slightly different changes in what might be called “the marriage penalty” provision of the payment limit rules.

“I used to always say that the only place men and women weren’t recognized as separate individuals was by USDA and the Lord,” said Bridgforth. “When you’re married, you’re considered one. And USDA thinks the same.”

Because of some interpretations of the law, husbands and wives were considered separate in two situations: (1) A husband and wife had separate farming interests prior to marriage, and they kept those separate during the marriage. (2) The husband and wife participate only in one payment.

“The theory in D.C. was ‘okay, Bill Bridgforth can get $40,000 as an individual and $20,000 for Corporation One and $20,000 for Corporation Two. That would mean $80,000 for his family unit,” said Bridgforth.

“But by making the husband and wife separate — both bills do it and the White House has signed off on it — the spouse can be the other entity in a corporation.”

In both bills, if one spouse makes a significant contribution of land or capital equipment or labor or management, the other spouse is automatically qualified as “actively engaged” if they made a significant contribution of labor and management.